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Key Takeaways First Quarter 2019
By Ralph Goldsticker, CFA | 8 April 2019

After a very rocky fourth quarter with the Fed putting future rate hikes on hold and fears of a global slowdown subsiding, capital markets recovered

  • Stock markets rallied around the globe. US stocks recovered most of their fourth quarter losses.

  • Bond prices climbed as interest rates on Treasury bonds of all maturities fell. Credit spreads narrowed as well.

  • The VIX returned to more normal levels as the fears about tighter monetary policy, trade conflicts, and a global slowdown subsided.

 

While fears of a global slowdown diminished during the quarter, policy and economic uncertainty persist

  • As US economic growth is transitioning to a slower pace, expectations of economic growth and earnings have stabilized.

  • The US economy is showing mixed signals. Labor conditions remain strong, while consumption, housing, and inflation are weak.

  • BREXIT, other trade conflicts, and promotion of populist politics continue to introduce uncertainty. We remain optimistic that they will resolve through negotiation without significant disruption to the capital markets.

Growth has slowed, but the economic outlook is stable

  • Volatility in the capital markets during the fourth quarter, combined with weaker than expected economic growth and muted inflation, resulted in the Fed putting the process of normalizing interest rates on hold.

  • Stocks appear to be fully priced. Future performance will depend on future economic growth meeting expectations, and on political uncertainty being contained.

  • Although interest rates are low by historical standards, over the longer-term we continue to expect low but positive returns from bonds. Any capital losses from rate increases will be offset by higher reinvestment rates.
     

Alan Biller and Associates is an investment adviser registered with the U.S. Securities and Exchange Commission

© 2019 by Alan Biller and Associates